If You Spill It, Is It Yours?

Another opportunity has presented itself as a timely American Intelligence Test case. After viewing the more than two week long marathon on the Gulf Oil Spill and the pending ecological disaster that it portends, the Administration and Congress are working to raise the $75M liability limit established in the Oil Pollution Act of 1990. There will be plenty of legal wranglings over this effort, but this intelligence test is not about the legality of this effort nor regarding the context of the “ex post facto” restriction in the Constitution. The questions in this test are focused on more fundamental aspects of the oil spill and the laws Congress has created to address such calamities.

I present a handful of questions and in some instances commentary to place a particular context on the questions. At the end, I provide my answers to these questions. As before, your score is your responsibility to assess. A willingness to deceive yourself, as to the correctness of your answers or beliefs, is just another measure of the actual intelligence level that is being measured. To paraphrase Lincoln:

Some of us can fool ourselves all of the time, and all of us can fool ourselves some of the time, but all of us can not fool ourselves all of the time.

Prime yourself, the opportunity to fail is here.

Background: Congress passed an environmental protection-focused Oil Pollution Act in 1990 that limited the liability on oil companies against damages caused by spills to $75M. While oil companies are totally responsible for containing the spill and cleaning up the spill, other impacts from the spill are limited by the $75M amount.

Question 1: Did Congress chose the $75M limit because 20 years ago that would be more than enough to cover any possible economic damage that an oil spill could produce, or were they were afraid that a higher limit (or no limit) would cause oil companies to spend to much on safety and preventative equipment?

A. 20 years ago and oil spill could not have caused damages beyond $75M.

B. Congress did not want too much money spent on equipment for preventing/containing spills.

C. The Oil industry’s lobbying group offered to determine a viable sum, and promised some good campaign contributions.

Question 2: Congress did not provide any method in the Act to adjust the liability limit with time. This is because Congress:

A. thought the potential economic value of damages and loses from a spill were not likely to increase over time

B. possessed no knowledge about nor had experts that understood the ‘time-value of money’

C. prefer to have the opportunity to change legislation thus opening the door for injecting other special interest needs into the bill

D. All of the above

Question 3: If Congress had not imposed a limit on liability then oil companies would have been at too great a risk of being bankrupt by a calamitous spill event, and this would have far greater negative impacts on the public.

True: Bankrupting a company would cost jobs and tax revenues thereby harming the economy far more than an oil spill could.

False: Establishing the limit only transfers these risks and the costs of an oil spill to the public; and reduces the incentives for companies to be conscientious about prevention and mitigation methods.



Question 4: Creating the Oil Pollution Act basically empowered the government to add a tax to the oil companies to establish a fund to help deal with the consequences of oil spills. In this way, the Government puts the cost burden on the oil companies rather than the public. This is one of the best ways to hold the oil companies responsible.

True or False

Question 5: After the Congressional hearings on the causes of the disaster and on the effectiveness and responsiveness of Governmental groups to the oil spill, Congress will:

A. Find that everyone involved did not act responsibly, Congress excepted of course

B. Promise to present new legislation that will prevent a disaster of this kind from happening again

C. Split along some undecipherable grouping like it being the fault of the current Administration who is in office (Democrats) versus the Administration that was in office when the Act was passed (Republicans)

D. Establish a Congressional oversight committee on off-shore oil drilling operations

E. All but D

Answers: Q1:=C Q2:=D Q3:=F Q4:=F Q5:=E

At the end of the day, Congress will do nothing that alters the basic facts associated with off-shore drilling and the oil industry. They will try to provide a legislative solution and regulatory agency that is charged to enforce the rules, but there will be neither any real teeth given to nor any backing for the agency. The system will be basically reactive rather than proactive, and it will become paper-work and reports oriented rather than analytic and forward looking. The media and public will soon find another crisis to focus their attention on, and will quickly relegate this event into annual year-in-review topics. It is hard for the public to remember that there is only one purse and it is their purse.